MYOPIC OR CONSTRAINED BY BALANCED-BUDGET-RULES?
THE INTERTEMPORAL SPENDING BEHAVIOR OF
NORWEGIAN LOCAL GOVERNMENTS
Lars-Erik Borge and Per Tovmo
The paper analyzes the intertemporal spending behavior of Norwegian
local governments with particular attention to liquidity constraints imposed
by balanced-budget-rules (BBRs). The main findings are: (i) On average,
local government spending behavior is neither perfectly forward looking
nor fully myopic. (ii) Local governments with good fiscal conditions behave
more forward looking than other local governments. (iii) A high degree
of party fragmentations is associated with less forward looking behavior.
The overall assessment is that the departure from rational forward looking
behavior reflects both liquidity constraints imposed by BBRs and myopic